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08 Aug 2012

Investment In UK Commercial Property Falls In Q2

Investment in offices, shops and warehouses in the UK dropped to a new low in the three months to June as property values fell below those in Ireland last week, according to the latest index by IPD (Investment Property Databank) published on 1 August.

The benchmark for investors in commercial property showed that net investment in property outside of London, including investment, sales, development and refurbishment, was a negative £161 million in the second quarter of the year, the first time the result has been negative since March 2009. The amount investors spend on investment, development and refurbishment of offices, shops and warehouses is a key indicator of the level of confidence in the future of the economy.

Investment from UK funds into London has declined in the past year as UK-based buyers are being priced out of markets that are traditionally volatile but are now considered safe havens by international investors. The number of purchases of City offices, which is among the most volatile London markets, dipped by 43% in the year to June from the corresponding period in the prior year.

In spite of this, the attention of UK-based buyers has not shifted to regional centres. Instead, investors' focus is on fringe locations in the capital and alternative property assets, where growth is still positive.

Property values in London continued to rise in the quarter, but growth slowed to 0.4% from 1.6% a year earlier. Of 30 cities outside of London, only capital value growth in Aberdeen was positive in the period.

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